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The German current account surplus - Holding captive the German and global economies

The German current account surplus - Holding captive the German and global economies

Summary

The size of Germany's current account surplus is an economic phenomenon as the forces behind it go beyond the simple competiveness of German exports. Indeed, the widening gap between domestic savings and investment is the determinant of this trade surplus, which is shaped by the actors of the German economy; namely firms, the government and households. Furthermore, the harmful impact of this trade surplus reaches across the domestic economy - where it is a source of rising inequality and limited social welfare - to the global stage, where it acts as a means of destabilizing the economies of countries that accumulate unsustainable debt through trade deficits.

Key Highlights

- The German exporting model has been based on the depreciation of German labor, as that is reflected by industrial relations and labor reforms. Simultaneously, the propensity of German households to save has led to subdued domestic consumption, reinforcing the exporting model. Furthermore, the attachment of the German government to fiscal surpluses has further enhanced this trend.
- The German exporting model is destructive for the global economy as it leads to the indebtedness of other countries while lying on the economic distortions of an undervalued currency.
- The current account surplus of Germany is a source of rising inequality and limited welfare for the German population as it has been built at their expense, with the benefits offering a lot to a few winners.

Scope

- Explores the size of the German current account surplus.
- Analyzes the forces behind the German current account surplus.
- Explores the various dynamics across the actors of the German economy that shape its current account surplus.
- Assesses the impact of the German current account surplus on the domestic and the global economies.

Reasons to buy

- How and why has the German current account surplus reached enormous levels?
- Why is the German current account surplus destabilizing for the global economy?
- Is the German exporting growth model beneficial for the domestic economy?